Hidden Costs of Buying a Home You Need to Know Now

It’s no secret that buying a home isn’t a simple transaction. You can’t swipe your debit card or tap your phone for this purchase. Our experts at The Woolcott Team don’t want you to get caught off guard by a hidden fee while buying a new home. That’s why we have rounded up the most common fees associated with the purchase of a home that you will most likely come across.

If you’re buying a house or want to educate yourself before you begin the process, keep reading!

Insurance

Home Insurance

It’s imperative that you have a quality home insurance policy to protect your house and the belongings inside. The cost of this annual insurance can range from $500 to $2,000 and can be paid monthly over the course of 12 months or in a lump sum. As a standard, home insurance often protects your house from severe weather, flooding, fires, and theft.

For more information about your protection, speak with your insurance company directly.

Mortgage Life Insurance

Mortgage life insurance offers protection in the case of death. If one or both of the homeowners pass away, this insurance will pay a portion of the mortgage or the entire amount. This insurance is optional and can be paid via lump sum or monthly payments.

Title Insurance

Ensure a peace of mind with this insurance. This insurance is optional, often ranges between $150-$350, is based on both location and price, and is a one-time fee at the point of sale. It can protect you from unsolved problems left behind by the previous owner, title fraud and encroachments, among many other issues.

High-Ratio Mortgage Insurance

Home buyers with a down payment of less than 20% of the home’s purchase price will likely be required to pay high-ratio mortgage insurance. This fee insures the mortgage and is usually about 0.5% to 4.5% of the entire loan amount. This fee can be paid upfront in a lump sum or divided equally across your mortgage payments.

Legal Fees

The services of both a lawyer and notary will be required during the purchase of your future home. Their services ensure that the transaction is legal. These fees generally cost between $1,000 and $3,000. When getting quotes from different notaries and lawyers, our experts at The Woolcott Team highly suggest that you acquire services that are all-inclusive, as to avoid any additional or unforeseen fees.

If you’re having trouble finding a lawyer or notary to work with, speak with our team of realtors at The Woolcott Team today. One of our realtors would be more than happy to point you in the right direction.

Taxes

Harmonized Sales Tax

Also known as HST, the harmonized sales tax is generally in place when purchasing a new-build home. Most often, this tax is included in the overall price. This tax is based on the overall price of the property and is usually 13% of the price. Check with your lawyer to see if your home is subject to HST. The good news is that HST typically does not apply for resale residential homes!

Land Transfer Tax

When a property changes hands in Ontario, it is subject to the land transfer tax. The Land Transfer Tax is calculated as a percentage of the sale price of the home. The tax is done a sliding scale, with the first $55,000 taxed at a rate of 0.5% up to any amount over $2,000,000 being taxed at 2.5%. For those living in Toronto, a property is also subject to a separate land transfer tax. There is an incentive in place for first time home buyers that helps to alleviate some of the financial burdens.

Inspections

The standard cost of a home inspection can range between $300 to $1,000. This inspection is essentially an evaluation of the property, examining the structure, current issues and any potential issues that could arise in the future.

This fee may feel tedious at first, but if an issue is found, that can be the leverage you require to negotiate a lower price or even have it fixed by the seller prior to you moving in. In some cases, it could be the saving grace that stands between you and a problematic house that causes you thousands of dollars of future repairs.

Surveys

A property survey may or may not be required by the lender. This outlines the boundaries of the property, utility placement, structures, easements, encroachments, and more. Property surveys generally cost between $1,000 and $2,000, depending on your location.

Valuations

Your mortgage lender will require an appraisal or valuation of your home prior to approving a loan. This inspection will give your lender a better idea of the actual value of the home and act as collateral. The sale price may or may not reflect on the actual value of the home, which can prove to be a big eye-opener for the buyer. If the home is greatly overpriced and the seller won’t budge on the selling price, it may not be worth the buyers time or money to invest.

The appraisal takes many factors into consideration, including the number of rooms, any problem areas, square footage, age, and location. The home valuation usually costs between $200 and $400 and takes place after the inspection.

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*Based on total closed dollar volume as reported by R E Stats Inc. for the period from January 1st, 2016 through December 31st, 2016. *Not intended to solicit persons or properties currently under contractual agreement.